Five benefits of hiring an accountant as a contractor

Choosing the right accountant is a crucial decision for any contractor working outside IR35.

On top of helping you to navigate the complexities of the off-payroll working legislation, an experienced and knowledgeable accountant can provide valuable support on other HMRC compliance matters, Companies House filing, managing your finances (and indirectly your time), while maximising take-home pay.

So while there are more of course, these are arguably the key five benefits of hiring an accountant as a contractor, writes Teodora Dimitrova, owner of Chart Accountancy.

Once your company is set up with Companies House, that’s it right? Wrong…

Just a reminder, though, about the filing we just identified – because once they’re registered with Companies House, some directors of PSCs (Personal Service Companies) might wrongly think that their duties are done.

Actually, as a contractor working outside IR35, as a director of a limited company, you must comply with certain rules under the Companies Act.

Directors are legally responsible for running the company and making sure company accounts and reports are properly prepared, and submitted on time.

How’s that metre-long 'to-do' list working out for you?

Of course, this significantly adds to your to-do list! In the dynamic, fast-paced world of tech contracting, as an independent consultant, you will already be dealing with clients, projects, agencies and contracts. Managing finances properly is another important aspect of running your contractor business but it’s one you can outsource to a qualified, specialist contractor accountant.

So while we’re specifying here five benefits of hiring an accountant as a contractor, maybe there’s a sixth – they provide a much-needed helping hand in the maintenance, efficiency and smooth-running of your contractor business. The best contractor accountant is almost akin to a business partner.

Now, let’s drill down into those five benefits of hiring an accountant, if you’re a contractor.

1. IR35 compliance knowledge

Given that you are working outside IR35, it's essential to choose an accountant who is well-versed in the IR35 regulations and the Off-Payroll Working rules. This knowledge base can help ensure you remain compliant with tax laws and regulations. An accountant with up-to-date knowledge of IR35, ranging from the very latest guidance from HMRC to the offset mechanism due to apply from April 6th 2024, can help you structure your contracts and financial affairs in a way that minimises the likelihood (and HMRC ramifications) of being deemed inside IR35.

2. Technology and tools

Consider an accountant who utilises modern accounting technology, and time-saving tools so you can communicate and work efficiently together, while keeping compliant with Making Tax Digital.

Remember, MTD has been introduced by HMRC for VAT, and is scheduled to roll out to cover corporation tax, and income tax. Our recommendation is to choose FreeAgent or Xero specialist contractor accountant to manage your day-to-day finances.

3. Time-saving and increased efficiency

Contractors often wear multiple hats, juggling project responsibilities, client interactions, and more.

Handling financial matters can be time-consuming and may divert focus from core professional activities. Indeed, we find many PSC contractors went into business, to be in business, not accounting!

Well, an accountant takes on the burden of financial management, by often offering fuss-free fixed fees packages helping contractors to remain compliant while maximising tax benefits. And not just compliant with HMRC, but compliant with Companies House, and the Companies Act too.

4. Financial expertise and compliance

An IR35-savvy contractor accountant will work with you to keep you on the right side of HMRC’s many frameworks while knowing how to respond to those frameworks, while ensuring your company continues to operate efficiently. For example, the best contractor accountants specialise in identifying and maximising deductible expenses, which can significantly impact a contractor's bottom line. From business-related expenses to allowable deductions, an accountant can help navigate the complex tax landscape to ensure that contractors only pay to HMRC what is required, ultimately maximising take-home.

Beyond day-to-day bookkeeping and tax filing, accountants provide valuable insights into strategic financial planning. They can assist contractors in setting financial goals, budgeting for future projects, and creating a roadmap for long-term financial success. This proactive approach helps contractors make informed decisions that align with their overall financial objectives.

5. Peace of mind and risk mitigation

The peace of mind that comes with having a professional manage your finances is invaluable. Accountants not only reduce the risk of financial errors and oversights but also act as a safeguard against potential HMRC enquires probing whether records are kept in check or potentially even deeper. By ensuring that financial records are accurate and up-to-date, accountants play a crucial role in minimising risks associated with non-compliance and financial discrepancies. And should an inspector call, your accountant is both your first port of call and your first line of defence.

Which accountant should limited company contractors choose?

In short, it’s typically a case of chartered certified accountant versus unqualified individual!

In fact, do you know that in the UK, anyone can call themselves an ‘accountant’?

So choosing a chartered, certified accountant gives you peace of mind that your adviser is knowledgeable and experienced in a wide range of financial matters and taxation, putting you in safe hands. Should you opt for an accountant who lacks proper qualifications or regulation to oversee your finances or tax-related matters, you might find yourself without recourse in the event of issues concerning the quality of their advice, their conduct, or their service standards.

In conclusion, hiring an accountant who specialises in IR35 as a contractor is a strategic investment which will return to you everything ranging from expert advice on HMRC and time-saving benefits to maximising tax-efficiency and minimising commercial risks. As contractors navigate the complexities of their professional journey, invariably dotted with numerous legislative and commercial challenges, partnering with an accountant can pave the way for financial compliance, stability and success.

TL;DR?

The right accountant can contribute significantly to your financial success as a limited company contractor working outside IR35.

Take the time to research, ask questions, and choose an accountant who aligns with your specific needs and goals. A well-informed decision in selecting the right accountant can lead to a smoother and more efficient financial management process. Good luck!